UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission file number 0-17660
METRIC PARTNERS
GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3050708
---------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 California Street
San Francisco, California 94111-5415
--------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 678-2000
(800) 347-6707 in all states
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Assignee Units
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
No market for the Limited Partnership Assignee Units exists and therefore
a market value for such Units cannot be determined.
<PAGE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
PART I
Item 1. Business.
Metric Partners Growth Suite Investors, L.P., a California Limited Partnership
(the "Partnership"), was organized in 1984 under the California Uniform Limited
Partnership Act. On April 1, 1997, Metric Holdings, Inc. and Metric Realty
Corp., the partners of the Managing General Partner, Metric Realty, were
involved in certain corporate transactions. Pursuant to these transactions, (i)
Metric Holdings, Inc. was merged into a newly-formed corporation known as SSR
Realty Advisors, Inc. ("SSR Realty"), which became the managing partner of
Metric Realty, and (ii) Metric Realty Corp. was merged into Metric Property
Management, Inc., a subsidiary of SSR Realty. Accordingly, the partners of
Metric Realty are now SSR Realty and Metric Property Management, Inc. After
consummation of these transactions, both partners of Metric Realty continue to
be wholly-owned subsidiaries of Metropolitan Life Insurance Company, as were
both partners prior to the occurrence of such transactions. The associate
general partner of the Partnership is GHI Associates II, L.P., a California
Limited Partnership. The general partner of GHI Associates II is Metric Realty
and the limited partner is Prudential-Bache Properties, Inc.
The Partnership's Registration Statement filed pursuant to the Securities Act of
1933 (No. 33-8610) was declared effective by the Securities and Exchange
Commission on April 14, 1988. The Partnership marketed its securities pursuant
to its Prospectus dated April 14, 1988 which was thereafter supplemented
(hereinafter the "Prospectus"). This Prospectus was filed with the Securities
and Exchange Commission pursuant to Rule 424(b) of the Securities Act of 1933.
The principal business of the Partnership is to acquire, hold for investment,
manage and ultimately sell all-suite, extended stay hotels which are operated
under franchise licenses from Residence Inn by Marriott, Inc. The Partnership is
a "closed" limited partnership real estate syndicate. For a further description
of the Partnership's business, see the sections entitled "Risk Factors" and
"Investment Objectives and Policies" in the Prospectus.
Beginning in April 1988, the Partnership offered $60,000,000 in Limited
Partnership Assignee Units. The offering was closed on June 30, 1989 with total
funding of $59,932,000. The net proceeds of the offering were used to purchase
ten hotel properties, which are described in Item 2. The acquisition activities
of the Partnership were completed on March 16, 1990, with the purchase of a
final hotel property, the Residence Inn - Altamonte Springs. Since that time,
the principal activity of the Partnership has been managing its portfolio. As
the Partnership's long-term goal is to ultimately liquidate the portfolio, the
markets where the hotels are located are monitored on an ongoing basis for
potential sales opportunities. The Partnership entered into a purchase and sale
agreement for the Residence Inn-Atlanta (Perimeter West) with an unaffiliated
buyer and sold the property on October 3, 1995. In 1997 the Partnership marketed
eight of the nine remaining hotels for sale, and on December 30, 1997 the hotels
were sold to an unaffiliated buyer.
Both the income and expenses of operating the properties which the Partnership
owns are subject to factors outside the Partnership's control, such as
oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, or changes in patterns of needs of users. In
addition, there are risks inherent in owning and operating hotels and other
lodging facilities because such properties are management and labor intensive
and especially susceptible to the impact of economic and other conditions
outside the control of the Partnership.
Expenses, such as local real estate taxes and management expenses, are subject
to change and cannot always be reflected in room rate increases due to market
conditions. The profitability and marketability of developed real property may
be adversely affected by changes in general and local economic conditions and in
prevailing interest rates, and favorable changes in such factors will not
necessarily enhance the profitability or marketability of such property. Even
under the most favorable market conditions, there is no guarantee that the
remaining property owned by the Partnership can be sold or, if sold, that such
sale can be made upon favorable terms.
There have been, and it is possible there may be other, federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The managing general partner is unable to predict the extent, if
any, to which such new legislation or regulations might occur and the degree to
which such existing or new legislation or regulations might adversely affect the
remaining property owned by the Partnership.
1
<PAGE>
Environmental site assessments were performed for each of the properties at the
time of property acquisition. No material adverse environmental conditions or
liabilities were identified at that time, nor were any identified during due
diligence conducted in conjunction with the sale of the Partnership's hotels. In
no case has the Partnership received notice that it is a potentially responsible
party with respect to an environmental clean-up site.
The Partnership and the hotel management company maintain property and liability
insurance on the Partnership's remaining property. The Partnership believes such
coverage to be adequate.
The Partnership is subject to the general competitive conditions of the lodging
industry. In addition, the Partnership's property competes in an area which
contains numerous other properties which may be considered competitive.
Item 2. Properties.
A description of the hotel properties which the Partnership owns or has owned is
as follows:
Name and Location Rooms Date of Purchase Date of Sale
- ----------------- ----- ---------------- ------------
Residence Inn-Ontario 200 04/88 12/97
2025 East D Street
Ontario, California
Residence Inn-Fort Wayne 80 06/88 12/97
4919 Lima Road
Fort Wayne, Indiana
Residence Inn-Columbus East 80 06/88 12/97
2084 South Hamilton Road
Columbus, Ohio
Residence Inn-Indianapolis 88 06/88 12/97
3553 Founders Road
Indianapolis, Indiana
Residence Inn-Lexington 80 06/88 12/97
1080 Newtown Pike
Lexington, Kentucky
Residence Inn-Louisville 96 06/88 12/97
120 North Hurtsbourne Lane
Louisville, Kentucky
Residence Inn-Winston-Salem 88 06/88 12/97
7835 North Point Boulevard
Winston-Salem, North Carolina
Residence Inn-Nashville (Airport) 168 05/89 N/A
2300 Elm Hill Pike
Nashville, Tennessee
Residence Inn-Atlanta (Perimeter West) 128 10/89 10/95
6096 Barfield Road
Atlanta, Georgia
Residence Inn-Altamonte Springs 128 03/90 12/97
270 Douglas Avenue
Altamonte Springs, Florida
See the Financial Statements in Item 8 for information regarding any
encumbrances to which the properties of the Partnership are subject.
2
<PAGE>
<TABLE>
Occupancy and room rates for the years ended December 31, 1997, 1996 and 1995 are as follows:
<CAPTION>
Average Average
Occupancy Rate (%) Daily Room Rate ($)
-------------------------- -----------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
HOTELS:
Residence Inn-Ontario(2)........................ 71 74 72 80.20 69.60 67.84
Residence Inn-Columbus East(2).................. 88 87 89 74.22 74.54 68.98
Residence Inn-Fort Wayne(2)..................... 85 88 93 66.25 67.45 62.43
Residence Inn-Indianapolis(2)........... 76 82 80 79.25 76.06 75.69
Residence Inn-Lexington(2).............. 89 91 84 77.49 71.92 71.90
Residence Inn-Louisville(2)............. 90 86 85 91.95 86.31 79.92
Residence Inn-Winston-Salem(2)........ 85 84 85 79.36 75.95 71.94
Residence Inn-Nashville (Airport)....... 82 76 77 85.71 78.74 77.43
Residence Inn-Atlanta (Perimeter West) (1)...... --- --- 81 --- --- 87.82
Residence Inn-Altamonte Springs(2).............. 84 86 82 91.45 83.73 78.31
<FN>
(1) Sold in October 1995.
(2) Sold in December 1997.
</FN>
</TABLE>
Project Operations
Project Operations for the years ended December 31, 1997, 1996 and 1995 are
shown on the following three pages. Project Operations tables reflect the
components of income or loss (before gain on sale) for each property which the
Partnership owns (or has owned) and the components of the loss at the
Partnership level. In addition, non-cash items such as depreciation and
amortization are shown. The tables also reflect principal payments on the
Partnership's notes payable and capital improvements.
3
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
Project Operations of the Residence Inns for
the Year Ended December 31, 1997
(000's)
Columbus Fort Indian- Lexing- Louis- Winston Nash- Altamonte Partner-
Ontario (East) Wayne apolis ton ville Salem ville Atlanta Springs ship Total
------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 4,170 $ 1,905 $ 1,636 $ 1,936 $ 2,018 $ 2,883 $ 2,162 $ 4,285 $ 0 $ 3,592 $ 0 $24,587
Telephone and other 230 73 72 68 122 154 126 221 0 125 0 1,191
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Hotel operations 4,400 1,978 1,708 2,004 2,140 3,037 2,288 4,506 0 3,717 0 25,778
Interest and other 0 0 0 0 0 0 0 0 0 0 415 415
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues 4,400 1,978 1,708 2,004 2,140 3,037 2,288 4,506 0 3,717 415 26,193
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 827 465 340 499 330 523 493 1,007 0 739 0 5,223
Administrative 545 282 211 234 298 388 252 400 0 398 0 3,008
Marketing 474 198 168 208 200 303 252 489 0 385 0 2,677
Energy 249 113 94 94 79 91 118 234 0 190 0 1,262
Repair and maintenance 235 126 77 134 126 133 139 299 0 184 0 1,453
Management fees 150 59 67 60 97 140 99 150 0 183 0 1,005
Property taxes 95 88 47 14 50 76 85 116 0 160 0 731
Other 174 56 52 50 66 85 76 311 0 105 0 975
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Hotel operations 2,749 1,387 1,056 1,293 1,246 1,739 1,514 3,006 0 2,344 0 16,334
Depreciation and other
amortization 259 115 120 141 139 148 141 520 0 176 0 1,759
Interest 855 273 289 335 326 376 330 861 0 682 0 4,327
General and administrative 0 0 0 0 0 0 0 0 0 0 959 959
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total expenses 3,863 1,775 1,465 1,769 1,711 2,263 1,985 4,387 0 3,202 959 23,379
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME(LOSS)(1) 537 203 243 235 429 774 303 119 0 515 (544) 2,814
Plus non-cash items - net 259 119 125 147 144 154 146 520 0 348 0 1,962
Less notes payable
principal payments 0 20 21 25 24 28 24 133 0 91 0 366
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Project operations 796 302 347 357 549 900 425 506 0 772 (544) 4,410
Capital Improvements 261 284 121 225 118 161 389 428 0 263 0 2,250
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 535 $ 18 $ 226 $ 132 $ 431 $ 739 $ 36 $ 78 $ 0 $ 509 ($ 544) $ 2,160
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
(1) Before gain on sale of property.
Occupancy 71% 88% 85% 76% 89% 90% 85% 82% 0% 84% 82%
ADR $ 80.20 $ 74.22 $ 66.25 $ 79.25 $ 77.49 $ 91.95 $ 79.36 $ 85.71 $ 0.00 $ 91.45 $ 81.77
4
</TABLE>
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
Project Operations of the Residence Inns for
the Year Ended December 31, 1996
(000's)
Columbus Fort Indian- Lexing- Louis- Winston Nash- Altamonte Partner-
Ontario (East) Wayne apolis ton ville Salem ville Atlanta Springs ship Total
------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 3,843 $ 1,923 $ 1,753 $ 2,031 $ 1,947 $ 2,653 $ 2,082 $ 3,744 $ 0 $ 3,412 $ 0 $23,388
Telephone and other 242 82 98 94 140 160 134 148 0 124 0 1,222
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Hotel operations 4,085 2,005 1,851 2,125 2,087 2,813 2,216 3,892 0 3,536 0 24,610
Interest and other 0 0 0 0 0 0 0 0 0 0 435 435
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues 4,085 2,005 1,851 2,125 2,087 2,813 2,216 3,892 0 3,536 435 25,045
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 698 458 366 490 342 482 444 930 0 689 0 4,899
Administrative 467 254 234 287 287 270 287 627 9 379 0 3,101
Marketing 468 198 197 259 248 310 252 451 0 379 0 2,762
Energy 245 109 95 114 88 100 115 239 0 176 0 1,281
Repair and maintenance 202 115 88 123 131 121 146 320 0 165 0 1,411
Management fees 123 74 89 64 76 115 94 117 0 164 0 916
Property taxes 94 71 29 76 52 77 63 112 0 164 0 738
Other 146 60 51 48 70 83 66 316 0 77 0 917
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Hotel operations 2,443 1,339 1,149 1,461 1,294 1,558 1,467 3,112 9 2,193 0 16,025
Depreciation and other
amortization 505 218 224 264 258 301 263 496 0 404 0 2,933
Interest 855 277 291 337 328 379 333 872 0 678 0 4,350
General and administrative 0 0 0 0 0 0 0 0 0 0 1,216 1,216
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total expenses 3,803 1,834 1,664 2,062 1,880 2,238 2,063 4,480 9 3,275 1,216 24,524
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME(LOSS) 282 171 187 63 207 575 153 (588) (9) 261 (781) 521
Plus non-cash items - net 505 222 228 269 263 307 268 496 0 564 0 3,122
Less notes payable
principal payments 3 18 19 22 22 25 22 129 0 100 0 360
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Project operations 784 375 396 310 448 857 399 (221) (9) 725 (781) 3,283
Capital Improvements 84 179 276 319 361 221 430 548 0 153 0 2,571
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 700 $ 196 $ 120 ($ 9) $ 87 $ 636 ($ 31) ($ 769) ($ 9) $ 572 ($ 781) $ 712
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Occupancy 74% 87% 88% 82% 91% 86% 84% 76% 0% 86% 82%
ADR $ 69.60 $ 74.54 $ 67.45 $ 76.06 $ 71.92 $ 86.31 $ 75.95 $ 78.74 $ 0.00 $ 83.73 $ 76.13
5
</TABLE>
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
a California Limited Partnership
Project Operations of the Residence Inns for
the Year Ended December 31, 1995
(000's)
Columbus Fort Indian- Lexing- Louis- Winston Nash- Altamonte Partner-
Ontario (East) Wayne apolis ton ville Salem ville Atlanta Springs ship Total
------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Hotel operations:
Rooms $ 3,603 $ 1,783 $ 1,693 $ 1,994 $ 1,751 $ 2,363 $ 1,956 $ 3,654 $ 2,496 $ 2,982 $ 0 $24,275
Telephone and other 244 66 94 99 135 157 111 173 153 142 0 1,374
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Hotel operations 3,847 1,849 1,787 2,093 1,886 2,520 2,067 3,827 2,649 3,124 0 25,649
Interest and other 53 0 0 0 0 0 0 7 54 0 344 458
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues 3,900 1,849 1,787 2,093 1,886 2,520 2,067 3,834 2,703 3,124 344 26,107
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
EXPENSES:
Hotel operations:
Rooms 672 396 331 444 380 416 391 877 493 767 0 5,167
Administrative 385 298 196 292 236 264 280 415 533 325 0 3,224
Marketing 446 157 165 228 174 243 192 384 258 291 0 2,538
Energy 274 107 91 97 90 98 100 236 131 174 0 1,398
Repair and maintenance 189 101 64 127 123 115 121 216 109 164 0 1,329
Management fees 154 120 116 137 123 165 135 115 132 167 0 1,364
Property taxes 78 89 80 79 51 80 66 105 82 167 0 877
Other 201 54 51 56 70 78 64 264 64 68 0 970
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Hotel operations 2,399 1,322 1,094 1,460 1,247 1,459 1,349 2,612 1,802 2,123 0 16,867
Depreciation and other
amortization 496 206 204 253 245 286 248 597 349 626 0 3,510
Interest 855 279 293 339 330 381 335 899 467 674 0 4,852
General and administrative 0 0 0 0 0 0 0 0 0 0 809 809
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total expenses 3,750 1,807 1,591 2,052 1,822 2,126 1,932 4,108 2,618 3,423 809 26,038
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME(LOSS)(1) 150 42 196 41 64 394 135 (274) 85 (299) (465) 69
Plus non-cash items - net 442 210 209 258 250 292 254 590 307 773 0 3,585
Less notes payable
principal payments 5 17 17 20 20 23 20 100 28 83 0 333
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Project operations 587 235 388 279 294 663 369 216 364 391 (465) 3,321
Capital Improvements 163 268 228 163 326 220 84 331 178 202 0 2,163
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Project operations after
capital improvements $ 424 ($ 33) $ 160 $ 116 ($ 32) $ 443 $ 285 ($ 115) $ 186 $ 189 ($ 465) $ 1,158
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
(1) Before gain on sale of property.
Occupancy 72% 89% 93% 80% 84% 85% 85% 77% 81% 82% 81%
ADR $ 67.84 $ 68.98 $ 62.43 $ 75.69 $ 71.90 $ 79.92 $ 71.94 $ 77.43 $ 87.82 $ 78.31 $ 74.18
</TABLE>
6
<PAGE>
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the Partnership is a
party or to which any of its assets are subject, except the following:
Metric Partners Growth Suite Investors, L.P. vs. Kenneth E. Nelson, The Nelson
Group, et al., San Francisco County Superior Court, Case No. 928065.
Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P., et
al., Circuit Court, State of Wisconsin, Case No. 94CV001212.
Orlando Residence, Ltd. (Plaintiff) vs. Nashville Lodging Company, Metric
Partners Growth Suite Investors, L.P., et al. (Defendants); Metric Partners
Growth Suite Investors, L.P. (Third Party Plaintiff) vs. 2300 Elm Hill Pike,
Inc. et al. (Third Party Defendant), Tennessee Chancery Court for Davidson
County, Case No. 92-3086-III.
Orlando Residence, Ltd. (Plaintiff) vs. 2300 Elm Hill Pike, Inc., et al.
(Defendants/Third Party Plaintiffs) vs. Metric Partners Growth Suite Investors,
L.P. (Third Party Defendant), Tennessee Chancery Court for Davidson County, Case
No. 94-1911-I.
Metric Partners Growth Suite Investors, L.P. vs. Nashville Lodging Co., 2300 Elm
Hill Pike, Inc., Orlando Residence, Ltd., and LaSalle National Bank, as trustee
under that certain pooling and servicing agreement, dated July 11, 1995, for the
holders of the WHP Commercial Mortgage Pass Through Certificates, Series 1995C1
and Robert Holland, Trustee, Chancery Court for Davidson County, in Nashville,
Tennessee, Case No. 96-1405-III.
Metric Partners Growth Suite Investors, L.P. vs. Joe Huddleston, Commissioner of
Revenue for the State of Tennessee, Tennessee Chancery Court for Davidson
County, Case No. 94-1227-II. (This case was settled during the fourth quarter of
1997.)
Kenneth E. Nelson and Nashville Lodging Co., vs. Metric Realty et. al.,
Tennessee Chancery Court for Davidson County, Case No. 97-2189-III.
Metric Realty, et. al., vs. Kenneth E. Nelson and Nashville Lodging Co., San
Francisco County Superior Court, Case No. 987134. (This case was voluntarily
dismissed without prejudice by plaintiffs during the fourth quarter of 1997.)
For information regarding these lawsuits, see Management's Discussion and
Analysis of Financial Condition and Results of Operations and Item 8, Note 7 to
the Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the period covered
by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Limited Partnership Assignee Unit holders are entitled to certain
distributions as provided in the Partnership Agreement. From inception through
January 29, 1998, Assignee Unit holders have received distributions from
operations and sales ranging from $608 - $701 for each $1,000 limited
partnership assignee Unit, inclusive of $310 from sales proceeds. No market for
Limited Partnership Assignee Units exists, nor is one expected to develop.
As of December 31, 1997, the approximate number of holders of Limited
Partnership Assignee Units was as follows:
Number of
Title of Class Record Holders*
-------------- ---------------
Limited Partnership Assignee Units.................. 4,646
- -----
*Number of Investments
7
<PAGE>
Item 6. Selected Financial Data.
<TABLE>
The following represents selected financial data for Metric Partners Growth
Suite Investors, L.P., a California Limited Partnership, for each of the five
years in the period ended December 31, 1997. The data should be read in
conjunction with the financial statements included elsewhere herein.
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------
1997(2) 1996 1995 1994 1993
------- ---- ---- ---- ----
(Amounts in thousands except per unit data)
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES ................................... $26,193 $25,045 $ 26,107 $ 25,008 $ 24,190
======= ======= ======== ======== ========
NET INCOME (LOSS):
Income (Loss) Before Gain on Sale of Properties $ 2,814 $ 521 $ 69 $ (947) $ (2,138)
Gain on Sale of Properties .................... 7,505 -- 3,275 -- --
------- ------- -------- -------- --------
NET INCOME (LOSS) ................................ $10,319 $ 521 $ 3,344 $ (947) $ (2,138)
======= ======= ======== ======== ========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP ASSIGNEE UNIT (1):
Income (Loss) Before Gain on Sale of Properties $ 47 $ 8 $ (1) $ (19) $ (39)
Gain on Sale of Properties .................... 120 -- 53 -- --
------- ------- -------- -------- --------
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP ASSIGNEE UNIT ....................... $ 167 $ 8 $ 52 $ (19) $ (39)
======= ======= ======== ======== ========
TOTAL ASSETS ..................................... $60,636 $67,436 $ 71,071 $ 74,936 $ 77,899
======= ======= ======== ======== ========
LONG TERM OBLIGATIONS:
Notes Payable ................................. $26,983 $42,518 $ 42,669 $ 48,800 $ 49,003
======= ======= ======== ======== ========
CASH DISTRIBUTIONS PER LIMITED
PARTNERSHIP ASSIGNEE UNIT ....................... $ 40 $ 68 $ 32 $ 30 $ 30
======= ======= ======== ======== ========
<FN>
- -----
(1) $1,000 original contribution per limited partnership assignee Unit,
based on limited partnership assignee units outstanding during the
period, after allocation to the General Partners.
(2) See discussion in Item 7 regarding future results of operations.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Introduction
This Item should be read in conjunction with Financial Statements contained
elsewhere in this Report.
In anticipation of the year 2000, the Managing General Partner is implementing a
Year-2000 compliant accounting software product to replace its existing system.
The new system will be fully operational by early 1999. All software programs
currently used by the Managing General Partner have been inventoried and
programs were identified which will require modification to correct date
handling methodology. Any necessary modifications will be completed by the end
of 1998. The Partnership's Servicing and Transfer Agent, Gemisys, utilizes a
platform programmed to correctly interpret the change to the new century. All
necessary changes will be undertaken at no cost to the Partnership.
The Partnership sold eight of its nine remaining hotels in December 1997.
Accordingly, historical financial information will not be representative of
future results. Future results of operations will be dependant on the operations
of the Partnership's remaining hotel, the Residence Inn - Nashville, general and
administrative expenses and interest income, as well as the outcome of the legal
proceedings relating to this hotel.
8
<PAGE>
Results of Operations
1997 Compared to 1996
Net income was $10,319,000 in 1997 compared to net income of $521,000 in 1996.
The net income in 1997 is comprised of $2,814,000 income before gain on sale of
properties and $7,505,000 gain on sale of properties. There was no gain on sale
of properties in 1996. Income before gain on sale of properties increased by
$2,293,000 in 1997 compared to 1996 primarily as a result of depreciation not
being recorded after June 30, 1997 on the real estate assets held for sale (see
Note 1 to the financial statements). In addition, operations improved
substantially at the Residence Inn - Nashville and the Partnership's general and
administrative expenses decreased.
Revenues from hotel operations increased 5% for 1997 compared to 1996 due to an
overall increase in average room rates and improved occupancy at the Residence
Inn - Nashville. Hotel operating expenses increased by 2% for 1997 compared to
1996. The increase was primarily in room operating expenses as a result of the
increase in room revenues. Management fees also increased as a result of the
increase in revenues. The increases in these two categories as well as an
increase in repair and maintenance expenses were partially offset by decreases
in administrative, marketing and energy costs. The decrease in administrative
expenses was primarily due to a favorable settlement regarding the disputed
sales and use taxes assessed by the State of Tennessee against the Partnership.
As of December 31, 1996, the Partnership had accrued $205,000 for potential
payment to the State of Tennessee, $165,000 of which had been expensed in 1996.
In 1997 the Partnership proposed, and the State accepted, payment of $122,000 in
settlement. Thus, in 1997 a credit of $83,000 was recorded and that, combined
with the $165,000 expense booked in 1996, resulted in a decrease in
administrative expenses of $248,000 in 1997 compared to 1996.
Interest income decreased by $20,000 for 1997 compared to 1996 as a result of
lower average cash balances in 1997. General and administrative expenses
decreased substantially in 1997 compared to 1996 primarily due to a write-off of
a $194,000 receivable in 1996 and the recognition in 1996 of a $74,000 cost
associated with the additional loan obligation on the Residence Inn - Nashville.
The operations of the properties and the markets in which they are located are
described below.
Residence Inn - Ontario: Operations were positive and reflected a slight
improvement in comparison to the prior year. The average daily room rate
increased $10.60 to $80.20. Occupancy declined by 3% to an average of 71%. The
local economy continued to show signs of growth, as reflected by the number of
new construction projects in the Ontario area. Strong competition, however,
continued throughout the year from two existing local competitors as well as
from a recently opened Extended Stay America.
Residence Inn - Columbus East: Operations were positive for the year, but
declined as compared to the prior year. Average occupancy remained favorable and
increased slightly to 88%, although the average daily room rate declined by $.32
to $74.22 as compared to 1996. Occupancy was strong at the property from July
through October due in part to an environmental group that occupied a large
block of rooms for this period. Economic growth appeared to slow somewhat in the
Columbus area during the year and the hotel market was competitive.
Residence Inn - Fort Wayne: Operations were positive for the year, but declined
compared to 1996 results. Occupancy was 85% as compared to 88% for the prior
year, and the average daily room rate decreased $1.20 to $66.25. The influx of
new hotels that came on line over the past year impacted the market and the
operations of the hotel. Additionally, an Extended Stay America hotel opened
recently, adding 101 rooms to the marketplace. Companies involved in the
automotive industry comprised the largest share of business for the hotel during
the year.
Residence Inn - Indianapolis: Operations for the year were positive and improved
over 1996 despite an increasingly competitive market. Occupancy declined to 76%
from 82% in the prior year; however, the average daily room rate increased by
$3.19 to $79.25. Hotel construction and expansion continued in the area despite
the forecasted decline in demand and the market remained extremely competitive.
Residence Inn - Lexington: Operations for the year improved significantly over
1996 results. Occupancy declined by 2% to 89; however, the average daily room
rate increased $5.57 to $77.49 in comparison to the prior year.Market conditions
improved toward the end of 1997, although significant new competition is
anticipated to impact the marketplace in the future.
9
<PAGE>
Residence Inn - Louisville: Operations for the year were positive and improved,
as compared to the prior year. Strong market conditions in Louisville resulted
in increases in both occupancy and room rates. Occupancy was 90% compared to 86%
in the prior year, and the average room rate rose $5.64 to $91.95. The economy
in the greater Louisville area remained favorable, due in part to its standing
as a mid-west industrial leader. An aggressive direct sales approach to both
current and new clients was utilized throughout the year to counter-act
competition from several new hotels which opened in the area.
Residence Inn - Winston-Salem: Operations were positive for the year, and
reflected improvement as compared to the prior year. Occupancy averaged 85% for
1997, a slight increase in comparison to the prior year. The average daily room
rate rose by $3.41 to $79.36 over the same period. The Winston-Salem market
appeared to stabilize during the year, although competition for patronage
remained strong.
Residence Inn - Altamonte Springs: Operations were positive for the year and
improved in comparison to the prior year. The average daily room rate for 1997
was $91.45, an increase of $7.72 over the rate for the prior year. Leisure
travel and project assignment business were strong during the year, providing a
stable patronage base for the hotel.
Residence Inn - Nashville: Operations were positive for the year and reflected
the greatest improvement of the Partnership's nine hotels in comparison to the
prior year. Occupancy increased 6% to 82% and the average daily room rate rose
$6.97 to $85.71, in comparison to the prior year. Market conditions improved
steadily over the year. During December, typically the most difficult operating
month for hotels due to the holidays, Residence Inn-Nashville averaged 67%
occupancy while competitors averaged 50% - 60%. The leisure market continues to
play a strong role in driving both occupancy and room rates; however, the
Opryland Theme Park will close this spring for a two-year renovation, which will
likely negatively impact the performance of the Partnership's hotel.
1996 Compared to 1995
Net income was $521,000 in 1996 compared to net income of $3,344,000 in 1995.
The net income in 1995 was comprised of $69,000 income before gain on sale of
property and $3,275,000 gain on sale of property, whereas there was no gain on
sale of property in 1996. Income before gain on sale of property increased by
$452,000 in 1996 compared to 1995 despite the loss of income from the Residence
Inn - Atlanta. Income before gain on sale of property increased at seven of the
nine remaining properties, although substantially reduced by an increase in loss
at the Residence Inn - Nashville and an increase in loss at the Partnership
level.
Revenues from hotel operations decreased 4% for 1996 compared to 1995 due to the
sale of the Residence Inn - Atlanta in 1995. The remaining nine properties all
experienced increases in revenue totaling 7% as average daily room rates
increased or stayed even and occupancy increased at five of the properties.
Properties experiencing decreases in occupancy had increases in room rates to
more than offset the decline in occupancy. Hotel operating expenses decreased 5%
primarily as a result of the sale of the Residence Inn - Atlanta in 1995. Hotel
operating expenses, exclusive of the effect of the sale of one hotel, increased
by 6% primarily due to significant increases in administrative and repair and
maintenance expenses at the Residence Inn - Nashville and in marketing costs at
all of the hotels. Administrative expenses at the Residence Inn - Nashville
increased due to the increase in accrual, from $40,000 at December 31, 1995 to
$205,000 at December 31, 1996, for potential payment to the State of Tennessee,
as a result of a sales and use tax audit covering the period 1989-1993. Overall
management fee expense decreased compared to 1995 due to the restructured
agreements with Marriott Corporation, which provided for lower base fees and
introduced incentive fees on all the properties which are tied to the operations
of the properties. Furthermore, the agreements provided for an increase in
certain marketing fees charged by Marriott causing an increase in marketing
costs for 1996 when compared to 1995. Interest and other income decreased by
$23,000 in 1996. The decrease was the net result of a $91,000 increase in
interest income primarily due to higher cash balances, specifically the proceeds
from the sale of the Residence Inn -Atlanta and a $114,000 decrease in income
resulting from recognition in 1995 of deferred income relating to the terminated
management contracts for the Residence Inns - Ontario and Atlanta. Depreciation
and amortization decreased $577,000 in 1996 as compared to 1995 due to the sale
of one hotel in the fourth quarter of 1995 as well as fully depreciated
furnishings at certain of the other hotels. Interest expense decreased $502,000
in 1996 compared to 1995 primarily due to the sale of the Residence Inn -
10
<PAGE>
Atlanta. General and administrative expenses increased $407,000 in 1996 when
compared to 1995 primarily due to the write-off of a $194,000 receivable (as
discussed below), increases in legal costs associated with the Residence Inn -
Nashville and increases in administrative expenses. In addition, the $74,000
additional loan obligation, assumed as a result of the Partnership becoming the
direct obligor on the first note on the Residence Inn - Nashville, was recorded
as a Partnership expense in 1996. See Note 4 to the Financial Statements. The
$194,000 receivable from a previous management company of the Residence Inn -
Ontario has been written off. It was previously financially supported by the
contemplated sale to the Partnership by an affiliated entity of said management
company (the owner until August 1996 of the land whereupon the Residence Inn -
Nashville is located, with whom the Partnership is involved in various
litigations [see Note 7 to the Financial Statements, Legal Proceedings]) of such
land, but collection is no longer deemed probable for financial statement
purposes only.
Partnership Liquidity and Capital Resources
Introduction
As presented in the Statements of Cash Flows, cash was provided by operating
activities. Cash was provided by investing activities from sale of properties
and proceeds from cash investments. Cash was used by investing activities for
purchases of cash investments and improvements to properties. Cash was used by
financing activities for note payable payments and distributions to partners.
The results of project operations before capital improvements for the year ended
December 31, 1997 are determined by net income or loss adjusted for non-cash
items such as depreciation and amortization, and reduced by principal payments
made on the notes payable (see Item 2, Properties). The project operations
before capital improvements is an indication of the operational performance of
the property. During 1997, all of the Partnership's nine remaining properties
generated positive project operations before deductions for capital
improvements. The Partnership, after taking into account results of project
operations before capital improvements, interest income, and general and
administrative expenses, on an accrual basis, experienced positive results from
operations. Project operations should not be considered as an alternative to net
income or loss (as presented in the financial statements), as an indicator of
the Partnership's operating performance, or as an alternative to cash flow as a
measure of liquidity. Project operations after capital improvements for any
given year may not be indicative of the property's general performance as
capital improvements are likely to be made in large amounts when associated with
renovation programs.
The Partnership considers cash investments to be those investments (primarily
commercial paper) with an original maturity date of more than three months at
time of purchase. The cash investments at December 31, 1997 are described in
Note 1 to the Financial Statements.
The former management company at the Residence Inn-Ontario which is controlled
by Kenneth E. Nelson ("Nelson") defaulted on certain obligations under the
management agreement. As discussed in Note 7 to the financial statements, in
1991, the Partnership terminated the management agreement and initiated legal
proceedings against the former management company. The management company
withheld $194,000 from property funds in unauthorized management fees prior to
relinquishing management of the property. The $194,000 was treated as a
receivable in the Partnership's financial statements until 1996 when it was
written off. See discussion in the Results of Operations section. In March 1993
the parties verbally agreed to settle the lawsuit (the "SF Settlement");
however, difficulties arose in consummating the settlement. After a hearing in
May 1994, the Court ruled in June that in the settlement the Partnership had
agreed to purchase the land underlying the Residence Inn-Nashville (the "Land")
from Nashville Lodging Company ("NLC"), an affiliate of Nelson, subject to a lis
pendens on the Land.
Following this ruling, the Partnership has attempted to negotiate and enter into
a settlement agreement and a land purchase agreement and related agreements (the
"Settlement Documents") among itself and Nelson and NLC and another Nelson
entity, 2300 Elm Hill Pike, Inc. ("2300"). To date, these parties have not been
able to reach agreement on all issues relating to the Settlement Documents.
As discussed in Note 7 to the financial statements, in May 1991 legal
proceedings were initiated against the Partnership and others by Orlando
Residence Ltd., ("Orlando"), holder of a promissory note issued by a previous
owner of the Residence Inn-Nashville (Airport) (the "Hotel"). Orlando claimed
the sale of the Hotel to the Partnership by NLC was intended to defraud, hinder
and delay Orlando's recovery of the amount owed to it. The Partnership obtained
a summary judgement dismissing the case against it on September 15, 1993.
11
<PAGE>
In July 1994, the Court in the case filed by Orlando ruled that the Hotel had
been fraudulently conveyed to NLC by 2300 in 1986 and voided the conveyance.
Judgements totaling more than $1,350,000 were subsequently entered by this Court
against Nelson, NLC and 2300. Based on this judgement, Orlando purchased the
Land at a judicial sale and became the landlord under the Lease. This judgement
was reversed in December 1996 and NLC asked the Court to return ownership of the
Land to it. However, the Court has denied NLC's request.
In another action in Nashville, Tennessee, 2300 and NLC have alleged that the
Partnership refused to purchase the Land as required by the SF Settlement and
demanded indemnification for all costs and losses of 2300 and NLC relating to
Orlando's claims. In February 1996, the Court in this action granted a motion
filed by 2300 and NLC for partial summary judgement, ruling that the Partnership
had breached the SF Settlement. The action will continue to determine damages
and other issues. In February 1998, the Court enjoined the Partnership from
conveying, transferring, or otherwise disposing of its cash to any extent which
would leave less than $5 million available for payment of any judgment awarded
to 2300 and NLC. The Partnership does not believe it breached the SF Settlement.
See Note 7 to the financial statements for more information about the foregoing
and other related proceedings.
It was reported to investors in December 1996 that it was the Partnership's
intention to proceed with the marketing for sale of the remaining hotels in the
portfolio. This decision was reached after consideration of many factors
including the improvement in operations of the hotels, in combination with their
age and the increasing competition in each of their respective markets, and the
recent activity of buyers purchasing hotels similar to those owned by the
Partnership. After review of the 1996 year end appraisals, the Partnership
interviewed a number of real estate brokerage firms and selected brokers who
began marketing the hotels for sale. The Partnership determined to forgo the
marketing of the Residence Inn - Nashville pending resolution of certain legal
proceedings. The sale of eight of the Partnership's nine remaining hotels was
completed on December 30, 1997.
In January 1998, the Partnership made two distributions to its general and
limited partners, one totaling $16,818,000, representing a portion of the net
sales proceeds, and another one totaling $612,000 representing a distribution
from 1997 operations. Additionally, the Partnership anticipates making another
distribution to its partners in April 1998 totaling $229,000 in order to comply
with certain states' tax withholding requirements. Taking these distributions
into account and projecting 1998 operations, the Partnership anticipates having
approximately $12 million in average cash balance for 1998. The balance may
change depending upon the Partnership's decision with respect to the note on the
Residence Inn - Nashville (see below). With respect to the use of cash, the
Partnership is under certain obligations and/or restrictions. In addition to the
$5 million restriction discussed above (and in Note 7 to the financial
statements), the Partnership was required by the purchaser, under the terms of
the sales contract, not to distribute $7.5 million of the sales proceeds for a
period of one year, which amount represents the maximum possible liability of
the Partnership for any breach of the sales agreement. There are no known
contingencies with respect to potential claims that could be brought against the
Partnership. The $7.5 million is not specifically restricted from any other
potential use by the Partnership, including the payment of the outstanding
balance due on the Residence Inn - Nashville loan.
The balloon mortgage payment for the Residence Inn - Nashville, totaling
approximately $8.5 million, is due on April 1, 1998 (see Note 4 to the financial
statements). The Partnership has been unable to negotiate an extension of the
loan with the lender. If the Partnership determines to pay the loan in full, it
would have to seek Court permission to use a portion of the $5 million
restricted by the Court (as noted above) in order to pay off the entire loan
balance. Additionally, the Partnership is involved in a number of legal
proceedings relating to the Residence Inn - Nashville, in one of which the
Partnership has filed a motion for permission to interplead $2 million of the
balloon mortgage payment with respect to which claims have been made by the
mortgage lender and NLC and an order staying any enforcement of such lender's
security interest pending disposition of such claims.
In 1997, the Partnership spent $2,250,000 on capital improvements. The majority
was spent on room, meeting room and/or gatehouse renovations at the Residence
Inns - Columbus, Fort Wayne, Indianapolis, Winston-Salem, Lexington, and
Nashville. Capital was spent on deck and stairway work and exterior painting at
the Residence Inns - Lexington and Nashville, doors and entryway improvements at
the Residence Inn - Fort Wayne, HVAC units at the Residence Inns - Louisville
and Indianapolis, siding replacements and painting of trim at the Residence Inn
- - Altamonte Springs, and for lock upgrades at the Residence Inns - Columbus,
Indianapolis, Lexington, Louisville, and Winston-Salem. Improvements to the
landscaping and grounds were made at the Residence Inns - Lexington and
Nashville. Voicemail systems were installed at the Residence Inns - Altamonte
Springs and Nashville. In 1998, the Partnership anticipates spending
approximately $210,000 on capital improvements. These improvements are necessary
to enable the remaining property to remain competitive in the market and are
required under the franchise agreement.
12
<PAGE>
During the second and third quarters of 1995 the Partnership worked with
Marriott in an effort to restructure contracts on certain Partnership hotels
under their management. An agreement was reached whereby Marriott reduced the
base management fee, and incorporated incentive fees which are tied to the
operations of the properties. The restructured agreements also provided for an
increase in certain marketing fees charged by Marriott. The length of the
contract terms was reduced. In addition, the Partnership was permitted to
terminate the contract after a five year term in connection with a sale of the
hotels. A termination fee was payable if the purchaser were not to continue the
Residence Inn by Marriott franchise. In exchange, the Partnership executed new
agreements with Marriott for the management of the Residence Inns located in
Altamonte Springs, Nashville, and Ontario. Effective January 1, 1996, Marriott
managed all nine of the Partnership's remaining hotels. Marriott continues to
manage the Partnership's Residence Inn - Nashville.
In accordance with, and as is customary in the management of hotels, the
management agreement for the remaining hotel provides for a percentage of
revenues to be placed in capital replacement funds. The capital replacement
funds are used to fund on-going capital improvements as well as room or other
major renovation programs. The capital replacement fund is being held in a
separate account with additions generally made monthly based on revenues and
expenditures which are based on approved capital expenditure budgets by the
Partnership. Unused funds are held in interest-bearing accounts. To the extent
not available from the replacement fund, a capital improvement or renovation may
be funded from the Partnership's working capital reserve.
In 1996 and 1997 a number of unsolicited offers to purchase Units were made to
the investors in the Partnership, of which the Partnership was aware. As
required by applicable securities laws, the Partnership notified its investors
of its views regarding these offers. The Partnership took no position with
respect to the offers but rather advised the holders of assignee limited
partnership Units to consult their personal financial advisors, as the
desirability of any particular offer to any Unit holder could differ greatly
depending upon such Unit holder's financial, tax, and other individual status.
Unit holders were also advised that the Partnership and its Transfer Agent would
take such action as the Partnership deemed appropriate to ensure that resale
transactions did not result in termination of the Partnership for tax purposes,
cause the Partnership to be classified as a publicly traded partnership or cause
the Partnership to be taxed as a corporation. Unit holders were reminded that,
in order to protect its status as a partnership for federal income tax purposes,
secondary market activity in its Units would be limited to less than 5% of the
outstanding Units per calendar year, and that, for any of these reasons the
Partnership may refuse to recognize a resale transaction.
In 1996, trading of assignee limited partnership Units of the Partnership
reached 4.9% as of April 9. Subsequent to that date and through the remainder of
the calendar year, the Partnership did not recognize resale transactions for
1996, and its Transfer Agent returned all paperwork regarding such transactions
to the originators. This action was taken by the General Partner in accordance
with its fiduciary responsibility and with the advice of Counsel to protect the
Partnership's tax status as a limited Partnership.
At the beginning of 1997 the suspension of resale transactions was removed;
however, on February 26, 1997, the Partnership's Transfer Agent informed the
General Partner that trading had again reached 4.9% (near the 5% maximum
percentage), at which time the General Partner again suspended processing of
resale transactions. Unit holders were advised of that suspension, in accordance
with Section 12.1 of the Partnership Agreement, via a special communication
dated February 27, 1997. All paperwork submitted from the time of the suspension
through the remainder of the calendar year was returned to the originator.
At the beginning of 1998 the suspension of resale transactions was removed.
Through March 15, 1998, the Partnership's Transfer Agent processed resale
transactions representing approximately 3.2% of the total number of outstanding
Units. Should resale transactions representing 4.9% of the total number of
outstanding Units be reached, the General Partner will again suspend processing
of these transactions. In this event investors will be notified immediately.
13
<PAGE>
Conclusion
The Partnership established an estimated value for the assignee Units in the
Partnership as of December 31, 1997. An appraisal of the remaining hotel was
commissioned and undertaken by a firm which is a recognized appraiser and
consultant to the hotel industry. The primary methodology employed in the
appraisal used in the evaluation, which was selected by the appraiser and not
pursuant to any instructions from the Partnership, was the income approach to
value utilizing a discounted cash flow analysis. In conjunction with the
preparation of the appraisal, a discount rate was determined by the appraiser
based on several relevant factors, including, but not limited to, the current
investment climate for hotel properties, local hotel market and economic
conditions, comparisons of occupancy and room rates with prevailing market rates
for similar properties and the status of the management contract for each hotel.
The Partnership believes that the assumptions utilized in the process were not
unreasonable. The value of the property as determined by the appraisal process,
in combination with the book value of other Partnership assets and liabilities
as of December 31, 1997, and after deducting the distributions made on January
13 and 29, 1998, has resulted in an estimated net asset value of each assignee
Unit of $239. (The estimated net asset value does not take into account any
distributions that the General Partners may be obligated to return to the
Partnership prior to liquidation of the Partnership. See Note 2 to the financial
statements.) As of December 31, 1996, the value of the properties as determined
by the appraisal process, in combination with the book value of other
Partnership assets resulted in an estimated net asset value of each assignee
unit of $503. The change in value from $503 as of December 31, 1996 to $239 was
primarily due to the distribution of a portion of the proceeds from the sale of
the eight Residence Inns in the amount of $275 per assignee Unit. It should be
noted that appraised values represent the opinion of the appraisal firm as of
the date of the appraisals and are based on market conditions at the time of the
appraisals and on assumptions concerning future circumstances which may or may
not be accurate.
This valuation is an estimate of the assignee Unit value only which has been
made as of December 31, 1997 based on the methodology described herein and does
not represent a market value. There can be no assurance that the sales of the
assets in the current market or at any time in the future would yield net
proceeds which on a per assignee Unit basis would be equal to or greater than
the estimated value. Further, there can be no assurance that sales of assignee
Units now or in the future would yield net proceeds equal to or greater than
this value. The assignee Units are illiquid and there is no formal liquid market
where they are regularly traded. However, the Partnership is aware that some
resales have taken place in the informal secondary market. In this informal
market, transactions may or may not take place in any time period and occur at a
price negotiated between buyer and seller. The Partnership has no knowledge
concerning how a particular price may be determined. A total of 325 resale
transactions were recorded on the books of the Transfer Agent between January 1,
1997 and February 26, 1997 (at which time the Partnership suspended trading- see
above), reflecting prices ranging from $191 to $466 per Unit, with a simple
average price (not weighted) of $283. In 1996 a total of 122 resale transactions
were recorded on the books of the Transfer Agent reflecting prices between $100
and $340, with a simple average price (not weighted) of $239 per Unit. In 1995,
sixty-five resale transactions, of which the Partnership had knowledge, were
recorded at a simple average price (not weighted) of $244 per assignee unit. The
Partnership's knowledge of these transactions is based solely on the books and
records of its Transfer Agent.
As discussed in Item 8, Note 7, there is substantial doubt regarding the
Partnership's ability to continue as a going concern.
14
<PAGE>
Item 8. Financial Statements and Financial Statement Schedules.
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors............................................................................ 16
Financial Statements:
Balance Sheets at December 31, 1997 and 1996........................................................... 17
Statements of Operations for the Years ended December 31, 1997, 1996 and 1995.......................... 18
Statements of Partners' Equity for the Years ended
December 31, 1997, 1996 and 1995...................................................................... 19
Statements of Cash Flows for the Years ended December 31, 1997, 1996 and 1995.......................... 20
Notes to Financial Statements.......................................................................... 21-28
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation at December 31, 1997 and 1996.................. 29-31
</TABLE>
Financial statements and financial statement schedules not included have
been omitted because of the absence of conditions under which they are required
or because the information is included elsewhere in the financial statements.
15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Metric Partners Growth Suite Investors, L.P., a California Limited Partnership:
We have audited the accompanying balance sheets of Metric Partners Growth
Suite Investors, L.P., a California Limited Partnership, (the "Partnership") as
of December 31, 1997 and 1996 and the related statements of operations,
partners' equity and cash flows for the three years in the period ended December
31, 1997. Our audit also included the financial statement schedule for 1997 of
the Partnership listed in the accompanying table of contents. These financial
statements and financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Partnership at December 31, 1997 and
1996 and the results of its operations and its cash flows for the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles. Also, in our opinion, the financial statement schedule
for 1997 and 1996, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
As discussed in Note 7 to the financial statements, the Partnership is
involved in litigation in connection with its one remaining hotel property. The
property is subject to a mortgage note payable that becomes due on April 1,
1998. The Partnership has been unsuccessful in obtaining an extension on the
note payable and may be unable to pay off or otherwise refinance the note. These
conditions raise substantial doubt about the Partnership's ability to continue
as a going concern. The Partnership's plans as to these matters are also
described in Note 4. The accompanying financial statements do not include any
adjustments that might result from this uncertainty.
Ernst & Young LLP
San Francisco, California
March 30, 1998
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
BALANCE SHEETS
December 31,
<CAPTION>
1997 1996
---- ----
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS .............................. $ 27,051,000 $ 3,436,000
CASH INVESTMENTS ....................................... 3,888,000 3,893,000
CASH IN ESCROW ......................................... 19,214,000 --
RESTRICTED CASH ........................................ 335,000 308,000
ACCOUNTS RECEIVABLE .................................... 1,295,000 715,000
PREPAID EXPENSES AND OTHER ASSETS ...................... 178,000 209,000
PROPERTIES AND IMPROVEMENTS ............................ 13,909,000 90,456,000
ACCUMULATED DEPRECIATION ............................... (5,263,000) (31,825,000)
------------ ------------
NET PROPERTIES AND IMPROVEMENTS ........................ 8,646,000 58,631,000
DEFERRED FINANCING COSTS ............................... -- 73,000
DEFERRED FRANCHISE FEES ................................ 29,000 171,000
------------ ------------
TOTAL ASSETS ........................................... $ 60,636,000 $ 67,436,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
ACCOUNTS PAYABLE ....................................... $ 1,542,000 $ 1,107,000
ACCRUED PROPERTY TAXES ................................. 116,000 311,000
ACCRUED PREPAYMENT PENALTIES ........................... 438,000 --
ACCRUED INTEREST ....................................... 307,000 263,000
OTHER LIABILITIES ...................................... 1,487,000 1,347,000
DEFERRED GAIN ON SALE OF PROPERTY ...................... 300,000 300,000
NOTES PAYABLE .......................................... 26,983,000 42,518,000
------------ ------------
TOTAL LIABILITIES ...................................... 31,173,000 45,846,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY:
GENERAL PARTNERS ...................................... 348,000 59,000
LIMITED PARTNERS (59,932 units outstanding) ........... 29,115,000 21,531,000
------------ ------------
TOTAL PARTNERS' EQUITY ................................. 29,463,000 21,590,000
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY ................. $ 60,636,000 $ 67,436,000
============ ============
See notes to financial statements.
</TABLE>
17
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Hotel operations ............................................................ $25,778,000 $24,610,000 $ 25,649,000
Interest and other .......................................................... 415,000 435,000 458,000
----------- ----------- ------------
Total revenues .............................................................. 26,193,000 25,045,000 26,107,000
----------- ----------- ------------
EXPENSES (Including $513,000, $461,000 and $410,000
paid to managing general partner and affiliates in 1997, 1996 and
1995, respectively)
Hotel operations
Rooms ............................................................... 5,223,000 4,899,000 5,167,000
Administrative ...................................................... 3,008,000 3,101,000 3,224,000
Marketing ........................................................... 2,677,000 2,762,000 2,538,000
Energy .............................................................. 1,262,000 1,281,000 1,398,000
Repair and maintenance .............................................. 1,453,000 1,411,000 1,329,000
Management fees ..................................................... 1,005,000 916,000 1,364,000
Property taxes ...................................................... 731,000 738,000 877,000
Other ............................................................... 975,000 917,000 970,000
----------- ----------- ------------
Total hotel operations ...................................................... 16,334,000 16,025,000 16,867,000
Depreciation and other amortization ......................................... 1,759,000 2,933,000 3,510,000
Interest .................................................................... 4,327,000 4,350,000 4,852,000
General and administrative .................................................. 959,000 1,216,000 809,000
----------- ----------- ------------
Total expenses .............................................................. 23,379,000 24,524,000 26,038,000
----------- ----------- ------------
INCOME BEFORE GAIN ON SALE OF PROPERTIES .................................... 2,814,000 521,000 69,000
Gain on sale of properties .................................................. 7,505,000 -- 3,275,000
----------- ----------- ------------
NET INCOME .................................................................. $10,319,000 $ 521,000 $ 3,344,000
=========== =========== ============
NET INCOME PER LIMITED PARTNERSHIP
ASSIGNEE UNIT:
Income (loss) before gain on sale of properties ............................. $ 47 $ 8 $ (1)
Gain on sale of properties .................................................. 120 -- 53
----------- ----------- ------------
NET INCOME .................................................................. $ 167 $ 8 $ 52
=========== =========== ============
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP
ASSIGNEE UNIT .............................................................. $ 40 $ 68 $ 32
=========== =========== ============
See notes to financial statements.
</TABLE>
18
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
For the Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
BALANCE, January 1, 1995 .................... $ (68,000) $ 23,916,000 $ 23,848,000
Income (Loss) Before Gain on Sale of Property 105,000 (36,000) 69,000
Gain on Sale of Property .................... 102,000 3,173,000 3,275,000
Cash Distributions from Sale ................ (2,000) (105,000) (107,000)
Cash Distributions from Operations .......... (37,000) (1,798,000) (1,835,000)
--------- ------------ ------------
BALANCE, DECEMBER 31, 1995 .................. 100,000 25,150,000 25,250,000
Net Income .................................. 43,000 478,000 521,000
Cash Distributions from Sale ................ (41,000) (2,000,000) (2,041,000)
Cash Distributions from Operations .......... (43,000) (2,097,000) (2,140,000)
--------- ------------ ------------
BALANCE, DECEMBER 31, 1996 .................. 59,000 21,531,000 21,590,000
Income Before Gain on Sale of Properties .... 2,000 2,812,000 2,814,000
Gain on Sale of Properties .................. 336,000 7,169,000 7,505,000
Cash Distributions from Operations .......... (49,000) (2,397,000) (2,446,000)
--------- ------------ ------------
BALANCE, DECEMBER 31, 1997 .................. $ 348,000 $ 29,115,000 $ 29,463,000
========= ============ ============
See notes to financial statements.
</TABLE>
19
<PAGE>
<TABLE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................................... $ 10,319,000 $ 521,000 $ 3,344,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ............................... 1,962,000 3,122,000 3,585,000
Cost associated with note payable change (see Note 4) ....... -- 74,000 --
Gain on sale of properties .................................. (7,505,000) -- (3,275,000)
Changes in operating assets and liabilities:
Accounts receivable ...................................... (580,000) 319,000 (288,000)
Prepaid expenses and other assets ........................ (1,000) (13,000) 118,000
Accounts payable, accrued expenses
and other liabilities ................................... 206,000 176,000 678,000
------------ ------------ ------------
Net cash provided by operating activities ........................... 4,401,000 4,199,000 4,162,000
------------ ------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of properties .................................... 58,644,000 -- 5,684,000
Capital improvements ................................................ (2,032,000) (2,571,000) (2,163,000)
Cash in escrow ...................................................... (19,214,000) -- --
Restricted cash - increase .......................................... (27,000) (6,000) (302,000)
Purchase of cash investments ........................................ (3,888,000) (5,862,000) (1,409,000)
Proceeds from sale of cash investments .............................. 3,893,000 1,969,000 1,409,000
------------ ------------ ------------
Net cash provided (used) by investing activities .................... 37,376,000 (6,470,000) 3,219,000
------------ ------------ ------------
FINANCING ACTIVITIES:
Notes payable principal payments .................................... (15,716,000) (360,000) (333,000)
Cash distributions to partners ...................................... (2,446,000) (4,181,000) (1,942,000)
------------ ------------ ------------
Cash used by financing activities ................................... (18,162,000) (4,541,000) (2,275,000)
------------ ------------ ------------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS .......................................... 23,615,000 (6,812,000) 5,106,000
Cash and cash equivalents at beginning of year ...................... 3,436,000 10,248,000 5,142,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR ..................................................... $ 27,051,000 $ 3,436,000 $ 10,248,000
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash during the year ............................... $ 4,080,000 $ 4,242,000 $ 4,636,000
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Balance of note payable assumed by buyer ............................ -- -- $ 5,922,000
============ ============ ============
Note payable increase (see Note 4) .................................. -- $ 74,000 --
============ ============ ============
Capital improvements - accrued ...................................... $ 218,000 -- --
============ ============ ============
Accrued prepayment penalties ........................................ $ 438,000 -- --
============ ============ ============
See notes to financial statements.
</TABLE>
20
<PAGE>
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization - Metric Partners Growth Suite Investors, L.P., a California
Limited Partnership (the "Partnership"), was organized under the laws of the
State of California to acquire, hold for investment, manage, and ultimately
sell, all-suite, extended stay hotels which are a franchise of the Residence Inn
by Marriott, Inc. The managing general partner is Metric Realty, an Illinois
general partnership. The Associate General Partner of the Partnership is GHI
Associates II, L.P., a California Limited Partnership, of which Metric Realty is
the general partner and Prudential-Bache Properties, Inc., a wholly-owned
subsidiary of Prudential Securities Group Inc., is the limited partner. Through
March 31, 1997, Metric Realty was owned by Metric Holdings, Inc. and Metric
Realty Corp. Metric Realty Corp. was the Managing Partner of Metric Realty. On
April 1, 1997, Metric Holdings, Inc. and Metric Realty Corp., the partners of
the Managing General Partner, Metric Realty, were involved in certain corporate
transactions. Pursuant to these transactions, (i) Metric Holdings, Inc. was
merged into a newly-formed corporation known as SSR Realty Advisors, Inc. ("SSR
Realty"), which became the managing partner of Metric Realty, and (ii) Metric
Realty Corp. was merged into Metric Property Management, Inc., a subsidiary of
SSR Realty. Accordingly, the partners of Metric Realty are now SSR Realty and
Metric Property Management, Inc. After consummation of these transactions, both
partners of Metric Realty continue to be wholly-owned individual subsidiaries of
Metropolitan Life Insurance Company, as were both partners prior to the
occurrence of such transactions. The Partnership was organized on June 28, 1984
and commenced operations on April 14, 1988. Capital contributions of $59,932,000
($1,000 per assignee Unit) were made by the limited partners.
Fair Value of Financial Instruments - The carrying amounts of cash and cash
equivalents, cash investments and restricted cash approximate their fair value.
The carrying amounts of the Partnership's notes payable approximate their fair
value due to the short term remaining under those notes.
Use of Estimates - The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments, primarily commercial paper, with an original maturity date of three
months or less at the time of purchase to be cash equivalents.
Cash Investments - Cash investments include all cash investments not considered
cash or cash equivalents. The cash investment at December 31, 1997 matures in
March 1998 and bear interest at an effective rate of 5.6% per annum.
Restricted Cash - Restricted cash consists of amounts related to the sale of the
Residence Inn - Atlanta (Perimeter West) which were deposited into an escrow
account. See Note 6.
Cash in Escrow - Cash in escrow consists of $19,070,000 due to the lender of the
notes payable on six of the hotels sold on December 30, 1997 and $144,000 in
funds held in escrow pending final closing settlement by the escrow agent. The
$19,070,000 was paid to the lender on January 2, 1998. The amount represented
$18,469,000 principal due, $438,000 prepayment penalties and $163,000 accrued
interest. The $144,000 excess funds held by the escrow agent were returned to
the Partnership on January 5, 1998. See Note 6.
Credit Risk - Financial instruments which potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents and restricted
cash. The Partnership places its cash deposits and temporary cash investments
with creditworthy, high-quality financial institutions. The concentration of
such cash deposits and temporary cash investments is not deemed to create a
significant risk to the Partnership.
21
<PAGE>
Properties and Improvements - Properties and improvements are stated at cost.
The Partnership adopted FASB Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", in 1996. The
statement was issued in March 1995 and requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets during the holding period are less than the assets' carrying amount. No
impairment losses were recorded as a result of the Partnership adopting
Statement No. 121. Prior to 1996, a provision for impairment of value was
recorded when a decline in value of property was determined to be other than
temporary.
In 1997, the Partnership adopted a plan to market for sale eight of its nine
remaining hotels. The hotels marketed for sale were the Residence Inns -
Ontario, Fort Wayne, Columbus (East), Indianapolis (North), Lexington,
Louisville, Winston Salem and Altamonte Springs. These hotels were sold on
December 30, 1997 in a single transaction. See Note 6. Pursuant to Statement No.
121, the eight hotels, when marketed, were classified as real estate held for
sale and no depreciation and amortization of deferred franchise fees for these
properties were recorded after June 30, 1997.
Gain on Sale of Properties - Sales are generally recorded at the close of escrow
or after title has been transferred to buyer and after appropriate payments have
been received and other criteria have been met.
Depreciation - Depreciation is computed using the straight-line method over
estimated useful lives of 30 years for buildings and improvements and six years
for furnishings.
Marketing - Marketing costs are expensed as incurred.
Deferred Financing Costs - Financing costs are deferred and amortized as
interest expense over the lives of the related loans, which are three to ten
years.
Deferred Franchise Fees - Franchise fees, paid in connection with the
acquisition of the Residence Inns, are deferred and amortized over the remaining
lives of the franchise agreements which range from ten to fifteen years.
Net Income Per Limited Partnership Assignee Unit - Net income per limited
partnership assignee Unit is computed by dividing net income allocated to the
limited partners by 59,932 assignee Units.
Income Taxes - No provision for Federal and state income taxes has been made in
the financial statements because income taxes are the obligation of the
partners.
2. Transactions With the General Partners and Affiliates
In accordance with the Partnership agreement, the Partnership is charged by the
managing general partner and affiliates for services provided to the
Partnership. The amounts are as follows:
1997 1996 1995
---- ---- ----
Partnership management fees ....... $213,000 $186,000 $160,000
Reimbursement of expenses ......... 300,000 275,000 250,000
-------- -------- --------
Total ............................. $513,000 $461,000 $410,000
======== ======== ========
Reimbursement of expenses include partnership accounting, professional services
and investor services.
In accordance with the Partnership agreement the general partners are allocated
their two percent continuing interest in the Partnership's net income or loss
and cash distributions. In addition, in 1994 the general partners were allocated
gross income of $245,000 in accordance with and calculated pursuant to the
Partnership Agreement. However, beginning in 1995, due to the general partners'
equity account balance, the Partnership adjusted and limited the income
allocation to the general partners to amounts equal to their two percent
continuing interest in cash distributions. Pursuant to the Partnership
Agreement, immediately prior to liquidation and if certain distribution levels
to the limited partners are not met, the general partners may be obligated to
return all or a portion of the cumulative amounts received in distributions.
22
<PAGE>
The general partners were allocated taxable gain and loss in accordance with the
Partnership Agreement.
3. Properties and Improvements
Hotel properties and improvements at December 31, 1997 and 1996 are summarized
as follows:
1997 1996
---- ----
Land ................................... $ -- $ 9,358,000
Buildings and improvements ............. 11,110,000 62,840,000
Furnishings ............................ 2,799,000 18,258,000
------------ ------------
Total .................................. 13,909,000 90,456,000
Accumulated depreciation ............... (5,263,000) (31,825,000)
------------ ------------
Net properties and improvements ........ $ 8,646,000 $ 58,631,000
============ ============
4. Notes Payable
The $26,983,000 notes payable balance at December 31, 1997 represents $8,514,000
outstanding balance on the note payable related to the Residence Inn -
Nashville, the Partnership's remaining property, and $18,469,000 outstanding
combined balance on the notes relating to six of the properties sold on December
30, 1997 which was paid on January 2, 1998. See Note 6.
With respect to the note on the Residence Inn - Nashville, monthly payments of
interest and principal are made until April 1998 when the note matures and a
balloon payment of $8,491,000 is due. The Partnership has been unable to
negotiate an extension of the loan with the lender. The Partnership is currently
reviewing its options with regard to this matter, including satisfying all or a
portion of the loan or sale of the Hotel. See Note 7. If the Partnership
determines to pay the loan in full, it would have to seek Court permission to
use a portion of the $5 million restricted by the Court (as described in Note 7)
in order to pay off the entire loan balance.
The Residence Inn - Nashville (Airport) note payable with an original balance of
$9,250,000 originally wrapped an existing loan which had a balance of
approximately $9,336,000 at the time the Partnership acquired the property.
However, on April 15, 1996, the Partnership made a payment of approximately
$176,000 to the lender of the underlying mortgage of the wrap note on the
Residence Inn - Nashville (Airport). The payment was made to cure defaults by
that lender to the holder of the wrap note for non-payment of the debt and
impound payments due on January 1, 1996 and February 1, 1996. As described in
Note 7, Legal Proceedings, the Partnership is now the direct obligor to the
first note holder and the note payable balance has been increased by $74,000,
the difference between the balance of the first note and the balance of the wrap
note on April 15, 1996. The $74,000 cost incurred to prevent foreclosure and to
eliminate the wrap note was recorded in 1996 as a general and administrative
expense in these financial statements. The terms of the first note vary slightly
from those of the wrap note. The interest rate is 9.5% per annum on the first
note compared to 9.9433% on the wrap note and monthly payments of interest and
principal are approximately $2,600 lower on the first note. Similar to the wrap
note, the first note matures in April 1998 and requires a balloon payment. As a
further consequence of the Partnership becoming a direct obligor to the first
note holder, the payments due under the land lease on Residence Inn - Nashville
(Airport) are reduced by $50,000 per year. See Note 5.
Certain of the notes were discounted over their term to yield interest at 10.15
to 10.5 percent per annum. Discount amortization was $149,000, $135,000 and
$124,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
Amortization of deferred financing costs totaled $54,000, $54,000 and $50,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
5. Minimum Future Rental Commitments
One property, the Residence Inn-Nashville (Airport), is utilized through a land
lease which provides for lease payments of $100,000 per annum for the first ten
years, plus an additional $50,000 per annum until the purchase money note to the
seller is paid in full. As described in Note 4, the purchase money note to the
seller was paid in full in April 1996, and the $50,000 annual payment is no
23
<PAGE>
longer due. Prior to April 1996, the $50,000 was payable in equal monthly
installments with payment of the balance being subordinated to returns to the
Partnership. Furthermore, up to $210,000 of the balance of the ground lease can,
and has been, applied by the Partnership as an offset under a guarantee
agreement. The portion of the accrued rent not paid currently accrues interest
at a rate of ten percent per annum, compounded annually. Furthermore, the lease
provides for additional payments based on 1.8% of the revenues of the hotel
through April 15, 1998.
Beginning in the eleventh lease year, the annual lease payment is adjusted every
five years with the payment based on application of the then current ten-year
United States Treasury Bond rate of interest, to a valuation of the land at the
higher of its then fair market value or the option price in the lease. The lease
extends through May 25, 2049 and contains an option to purchase the fee interest
in the land.
Rental expense (including the 1.8% of revenues) for this lease was $178,000,
$186,000 and $219,000 in 1997, 1996 and 1995.
6. Sale of Properties
The Partnership sold the Residence Inns - Ontario, Columbus (East), Fort Wayne,
Indianapolis, Lexington, Louisville, Winston Salem and Altamonte Springs on
December 30, 1997. The combined sales price, for the package of these eight
residence inns, was $59,500,000. After payment of the outstanding balances on
the loans totaling $33,819,000 and expenses of sale totaling $1,294,000,
including $438,000 of prepayment penalties on certain of the loans, the net
proceeds to the Partnership were $24,387,000. Pursuant to an agreement with the
lender on six of the eight residence inns, the outstanding balances on the
related six notes totaling $18,469,000, and the required prepayment penalties of
$438,000, were not paid until January 2, 1998. To secure payment to the lender
of the six notes mentioned, a portion of the net sales proceeds was retained in
an escrow account on December 30, 1997, sufficient to pay off the outstanding
principal balances, prepayment penalties due pursuant to the loan agreements and
interest accrued to date of payoff, and is reflected in Cash in Escrow on the
December 31, 1997 balance sheet.
The Partnership was required by the purchaser, under the terms of the sales
contract, not to distribute $7,500,000 of the sales proceeds for a period of one
year, which amount represents the maximum possible liability of the Partnership
for any breach of the sales agreement. There are no known contingencies with
respect to potential claims that could be brought against the Partnership.
The Partnership sold the Residence Inn-Atlanta (Perimeter West) on October 3,
1995. The net sales price was $11,350,000 after deducting $300,000 that was
deposited into an escrow account (the "Shortfall Guaranty Account"). The
Partnership has guaranteed certain income levels to the buyer for the years from
1996 through 1998. To the extent these income levels are not attained, the buyer
will receive the deficiency, up to the maximum $300,000, from the Shortfall
Guaranty Account. Any unused funds in the Shortfall Guaranty Account at December
31, 1998, will be returned to the Partnership together with interest. The
guaranteed income levels for 1996 and 1997 were achieved and no funds are due to
seller from the Short Fall Guarantee Account for those years. Gain on sale of
$300,000 has been deferred until the contingency has been removed.
The buyer assumed the existing loan with a balance of $5,922,000. After payment
of expenses of sale, the proceeds to the Partnership were approximately
$5,384,000. Of that amount, $107,000, representing state real property
withholding taxes due on the gain on sale, was paid to the State of Georgia and
recorded as cash distributions to partners from sale in these financial
statements because such taxes are the obligation of the partners.
7. Legal Proceedings
Metric Partners Growth Suite Investors, L.P. vs. Kenneth E. Nelson, The Nelson
Group, et al., San Francisco County Superior Court, Case No. 928065 (the "SF
Lawsuit"). [The lawsuits described below (other than the sales tax related case)
are related. Terms defined in the description of one case may be used in the
description of the other cases.]
This lawsuit relates to disputes in connection with management of the
Partnership's Residence Inn - Ontario by an entity controlled by Kenneth E.
Nelson ("Nelson") from April 1988 to February 1991. In March 1993, the
Partnership and Nelson verbally agreed to settle the SF Lawsuit at a settlement
conference (the "SF Settlement"), whereby the Partnership would purchase at a
discount the land (the "Land") underlying the Partnership's Residence Inn -
24
<PAGE>
Nashville (the "Hotel") currently leased by the Partnership from Nashville
Lodging Company ("NLC"), an entity controlled by Nelson. Various disagreements
between the Partnership and Nelson regarding the SF Settlement arose after March
1993 and documents to effectuate the SF Settlement were never executed.
In July 1994, the Court in the Nashville Case I, discussed below, ruled that the
Hotel had been fraudulently conveyed to NLC in 1986 and voided the conveyance.
The Court in the Nashville Case I ordered a sale of the Land, subject to all
prior encumbrances, including the ground lease of the Land by the Partnership
(the "Lease"). As discussed in more detail below (see "Nashville Case I"),
subsequent to a judicial sale held on July 24, 1996, the Court ruled in a
confirmation hearing held in August 1996 that the Land would be sold to Orlando
Residence, Ltd ("Orlando"). In December, 1996, the Tennessee Court of Appeals
reversed the judgement underlying the judicial sale; however, the Court has
ruled against NLC on its motion that the Land be reinstated to NLC.
Orlando Residence Ltd. vs. Metric Partners Growth Suite Investors, L.P. et al.,
Chancery Court for Davidson County, in Nashville, Tennessee, Case No.
92-3086-III ("Nashville Case I")
2300 Elm Hill Pike, Inc. ("2300") (formerly known as Nashville Residence
Corporation until 1986) was the original owner of the Hotel (including the
Land). 2300 conveyed its interest in the Hotel (including the Land) to NLC in
1986 by unrecorded quitclaim deed. In April 1989, NLC sold the Hotel and leased
the Land to the Partnership pursuant to the Lease.
In October 1992, Orlando filed this lawsuit against NLC and its general partners
and the Partnership, alleging that the sale of the Hotel and the Land by 2300 to
NLC in 1986 and NLC's subsequent sale of the Hotel and lease of the Land to the
Partnership in 1989 were fraudulent conveyances, intended to hinder Plaintiff's
recovery of a judgment against 2300. In August 1993, the Court dismissed this
action against the Partnership. The Partnership's only material continuing
interest in the case is its effect on ownership of the Land and the Lease.
In August 1994, the Court held that the sale of the Hotel by 2300 to NLC was a
fraudulent conveyance and voided the conveyance. The defendants appealed the
judgment for Orlando in this case to the Tennessee Court of Appeals, but the
judgment was not stayed pending appeal. Oral argument on this appeal was held on
November 1, 1996, and in December 1996, the Court of Appeals reversed the
judgement for Orlando, sending the case back to the lower court for further
proceedings.
Prior to this reversal, Orlando requested and the Court ordered a judicial sale
of the Land, with the sale subject to encumbrances of record, including the
Lease. The sale was a credit sale, with the purchase price due in six months.
This sale was held on July 24, 1996. At a confirmation hearing in August 1996,
the Court ordered the Land to be sold to Orlando. The Court further ordered that
Orlando was to become the landlord under the Lease. Because of this reversal and
the refusal of the Tennessee Supreme Court to hear an appeal from Orlando, NLC
asked the Chancery Court to return ownership of the Land to it, which would
result in it again becoming the landlord under the Lease. The Court heard
argument regarding NLC's request on September 11, 1997, and later ruled against
NLC. Thus, Orlando continues to be the owner of the Land and the Partnership's
landlord under the Lease. NLC may appeal this ruling for Orlando.
Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P. et
al., Circuit Court, State of Wisconsin, Case No. 94CV001212.
In February 1994, NLC served this lawsuit on the Partnership. NLC alleges fraud,
breach of settlement contract and breach of good faith and fair dealing and
seeks compensatory, punitive and exemplary damages in an unspecified amount for
the Partnership's failure to consummate the SF Settlement. In February 1994, the
Partnership filed an answer and requested that the Court stay the action pending
resolution of the SF Lawsuit including all appeals. The Court refused to stay
the action and discovery commenced. In February 1995, the Court determined that
the Partnership could be sued in Wisconsin but stayed the case until the
settlement of the SF Lawsuit has been finalized.
Orlando Residence Ltd. vs. 2300 Elm Hill Pike, Inc. and Nashville Lodging
Company vs. Metric Partners Growth Suite Investors, L.P., Chancery Court for
Davidson County, in Nashville, Tennessee, Case No. 94-1911-I ("Nashville Case
II").
25
<PAGE>
Orlando filed this action against 2300 and NLC in the Davidson County Chancery
Court to attempt to execute on its judgment against Nelson, NLC and 2300 in
Nashville Case I by subjecting the Land to sale. In May 1995, 2300 and NLC filed
a third-party complaint against the Partnership, alleging it had refused to
purchase the Land as required by the SF Settlement. 2300 and NLC demand payment
by the Partnership of 2300 and NLC's costs of defending Nashville Case II and
indemnification for any loss resulting from the claims of Orlando, among other
claims of damage.
In February 1996, the Court granted a motion filed by 2300 and NLC for partial
summary judgement, ruling that the Partnership had breached the SF Settlement.
The action will continue to determine damages and other issues. Trial had been
set for February 9, 1998, but was continued to December 7, 1998. The Partnership
does not believe it breached the SF Settlement and will appeal this ruling at an
appropriate time. However, no assurance can be given that its appeal will be
successful. In any event, the Partnership does not believe that any damages it
might ultimately be required to pay in this action will have a material adverse
effect on the Partnership.
In late October 1997, 2300 and NLC filed a motion for an injunction to prohibit
GSI from distributing proceeds from the sale of the Residence Inns owned by GSI,
pending a final judgement in this case. A hearing on this motion was held in
February 1998 and the Court enjoined the Partnership from conveying,
transferring, distributing or otherwise disposing of its cash to any extent
which would leave less than $5 million available for payment of any judgment
obtained by 2300 and NLC.
Metric Partners Growth Suite Investors, L.P., vs. Nashville Lodging Co., 2300
Elm Hill Pike, Inc., Orlando Residence, Ltd., and LaSalle National Bank, as
trustee under that certain pooling and servicing agreement, dated July 11, 1995,
for the holders of the WHP Commercial Mortgage Pass Through Certificates, Series
1995C1 and Robert Holland, Trustee, Chancery Court for Davidson County, in
Nashville, Tennessee, Case No. 96-1405-III ("Nashville Case III").
GSI filed this action May 3, 1996 to obtain, among other things, a judicial
determination of the rights and obligations of GSI and NLC under the senior
mortgage on the Hotel ("Senior Mortgage"), a note held by NLC "wrapped around"
the Senior Mortgage (the "Wrap Note") and the Lease as a consequence of GSI's
cure of certain defaults by NLC under the Senior Mortgage. GSI believed that as
a result of such cure, it became the direct obligor to the lender under the
Senior Mortgage and that the Wrap Note had been satisfied and the payments due
under the Lease reduced by $50,000 per year. GSI also sought preliminary and
permanent injunctive relief to prevent NLC from attempting to accelerate or
foreclose the Wrap Note and/or from attempting to enforce any remedies with
regard to the Lease in connection with this matter and a judgment establishing
that GSI is the owner of the Hotel, subject only to the Lease and certain
specified security interests.
In May 1996, the Partnership obtained a temporary injunction staying NLC from
undertaking any efforts to exercise any remedies pursuant to the Wrap Note or
the Lease. NLC and 2300 filed an answer in June, together with a counterclaim
against the Partnership. NLC and 2300 claimed damages from the Partnership and
asked the Court to permit acceleration of the Wrap Note and termination of the
Lease. In July 1996, the Partnership filed a motion for summary judgment in this
case, asking that the Court award the relief sought by it and that the Court
dismiss the counterclaim of NLC and 2300. At a hearing on this motion held in
August 1996 the Court granted the Partnership's motion. The defendants have
appealed all judgments for the Partnership in this case. The Partnership and the
defendants have agreed on an attorneys' fee award to the Partnership of $60,000,
but no payment is expected until the defendants' appeal is resolved. Both
parties have filed briefs with the appellate court and oral argument is to be
held in July 1998.
In late March 1998, the Partnership filed a motion for permission to interplead
approximately $2 million with respect to which claims have been made by NLC and
the lenders under the Senior Mortgage and an order staying any enforcement of
such lender's security interest pending decision of such claims.
Metric Realty et al vs. Kenneth E. Nelson and Nashville Lodging Co., San
Francisco County Superior Court, Case No. 987134 (the "Declaratory Relief
Action").
Kenneth E. Nelson and Nashville Lodging Co. vs. Metric Realty et al., Chancery
Court for Davidson County in Nashville, Tennessee, Case No. 97-2189-III (the
"Inducement Action").
26
<PAGE>
In the second quarter of 1997, Nelson alleged that Metric Realty and GHI
Associates II, L.P., the Managing and Associate General Partners, respectively,
of the Partnership, and certain of Metric Realty's affiliates (the "Affiliates")
and certain former and current employees of Metric Realty or its affiliates (the
"Employees") had improperly induced the Partnership to breach the SF Settlement.
In May 1997, Metric Realty and GHI Associates II, L.P., the Affiliates and the
Employees filed the Declaratory Relief Action against Nelson and NLC to obtain a
judgment that the plaintiffs did not improperly cause the Partnership to breach
the SF Settlement. In June 1997, Nelson and NLC filed the Inducement Action in
the Chancery Court for Davidson County, in Nashville, Tennessee (the "Chancery
Court") against Metric Realty, GHI Associates II, L.P., the Affiliates and
certain of the Employees (the "Inducement Action Defendants"), seeking
unspecified compensatory, treble and punitive damages for the alleged improper
inducement of breach of contract.
As to the Declaratory Relief Action, the defendants filed motions to quash
service of process, to stay the case and to transfer it to Tennessee, which
motions were denied by the Court on September 15, 1997. In November 1997, the
plaintiffs determined to dismiss this action without prejudice.
As to the Inducement Action, the Inducement Action Defendants removed the
lawsuit from the Chancery Court to the U.S. District Court for Tennessee on July
25, 1997. On August 11, 1997, Nelson asked the Court to remand this action to
the Chancery Court, and on January 28, 1998, the court remanded this action back
to Chancery Court. In the Inducement Action, Defendants have filed a motion to
dismiss the complaint against the Employees and one of the Affiliates named in
the action based on lack of jurisdiction and against the remaining Affiliates
based on failure to state a claim. The Chancery Court has not yet taken action
on these matters.
The legal and other expenses of the Inducement Action Defendants in both the
Declaratory Relief Action and the Inducement Action arising as a result of the
allegations made by Nelson will be paid by the Partnership pursuant to the
indemnification provisions of the Partnership's limited partnership agreement
and subject to the conditions set forth in those provisions.
Metric Partners Growth Suite Investors, L.P. vs. Joe Huddleston, Commissioner of
Revenue for the State of Tennessee, Chancery Court for Davidson County, in
Nashville, Tennessee, Case No. 94-1227-II.
GSI filed this action on April 25, 1994 to challenge the assessment of a sales
and use tax deficiency by the State for the period 1989 through 1993 (the
alleged deficiency plus estimated accrued interest totaled $217,000 at June 30,
1997). In general, the claimed deficiency relates primarily to sales tax alleged
to be owed in connection with (i) room rental to federal employees, (ii)
telephone calls by guests and (iii) food and beverage items used in the Hotel's
complimentary breakfast and evening social hour. In February 1997, GSI learned
that this case had been dismissed for failure to prosecute by its attorneys. On
April 25, 1997, the Court granted the Partnership's motion to reinstate the case
and a trial was scheduled for the fourth quarter of 1997. In September 1997, GSI
proposed to settle this potential liability by paying approximately $122,000 and
agreeing to pay sales tax on complimentary items going forward, which proposal
was accepted by the State in late October 1997. GSI paid the agreed amount on
November 3, 1997, which completed the settlement of this proceeding.
As discussed in Note 4, the Partnership is currently reviewing its alternatives
with regard to the Partnership's remaining Hotel including potentially
satisfying all or a portion of the loan, or sale of the asset. These
circumstances, as well as (i) the substantial legal fees and costs that have
been and are expected to be incurred by the Partnership in connection with the
existing lawsuits, (ii) the usual uncertainty of litigation, and (iii) the
effect of these lawsuits on the Partnership's present ability to refinance or
sell the Hotel, create substantial doubt about the Partnership's ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from these uncertainties.
27
<PAGE>
8. Reconciliation to Income Tax Method of Accounting
<TABLE>
The differences between the method of accounting for income tax reporting and
the accrual method of accounting used in the financial statements are as
follows:
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income - financial statements ................... $ 10,319,000 $ 521,000 $ 3,344,000
Differences resulted from:
Gain on sale of property ......................... 613,000 -- 281,000
Depreciation ..................................... (683,000) (137,000) (95,000)
Prepayment penalties ............................. (438,000) -- --
Amortization of notes payable discount ........... 148,000 135,000 124,000
Interest ......................................... (23,000) (6,000) (17,000)
Other ............................................ (54,000) (58,000) (141,000)
------------ ------------- ------------
Net income - income tax method ...................... $ 9,882,000 $ 455,000 $ 3,496,000
============ ============= ============
Taxable income per limited partnership assignee unit
after giving effect to the allocation to the general
partners ........................................... $ 161 $ 3 $ 53
============ ============= ============
Net assets and liabilities - financial statements ... $ 29,463,000 $ 21,590,000 $ 25,250,000
Cumulative differences resulted from:
Gain on sale of property ......................... 300,000 300,000 300,000
Depreciation ..................................... 90,000 514,000 651,000
Amortization of notes payable discount ........... -- 2,347,000 2,211,000
Interest ......................................... 76,000 (2,211,000) (2,205,000)
Capital account adjustment ....................... -- 5,993,000 5,993,000
Other ............................................ 41,000 (6,000) 53,000
------------ ------------- ------------
Net assets and liabilities - income tax method ...... $ 29,970,000 $ 28,527,000 $ 32,253,000
============ ============= ============
</TABLE>
9. Subsequent Events
On January 13, 1998, the Partnership distributed $16,819,000 of the $24,387,000
net sales proceeds to the limited and general partners. On January 29, 1998 a
distribution totaling $612,000 and the related partnership management fees was
made representing a portion of the fourth quarter 1997 earnings from operations
28
<PAGE>
<TABLE>
SCHEDULE III
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F G H
Cost Capitalized
Initial Cost Subsequent Gross Amount at Which
to Partnership to Acquisition Carried at Close of Period(1)
-------------- -------------- ----------------------------
Accumu- Date
Buildings Buildings lated of Date
and and Deprecia- Con- of
Encum- Improve- Improve- Carrying Improve- tion struc- Acqui-
Description brances Land ments ments Costs Land ments Total(2) (3)(4) tion sition
- ----------- ------- ---- ----- ----- ----- ---- ----- -------- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Amounts in thousands)
HOTEL:
Residence Inn-Nashville (Airport)
Nashville, Tennessee.......$8,514 $11,416 $3,018 $(525) $13,909 $13,909 $5,263 1/85 5/26/89
====== ======= ====== ====== ======= ======= ======
See accompanying notes.
</TABLE>
29
<PAGE>
<TABLE>
SCHEDULE III
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F G H
Cost Capitalized
Initial Cost Subsequent Gross Amount at Which
to Partnership to Acquisition Carried at Close of Period(1)
-------------- -------------- -----------------------------
Accumu- Date
Buildings Buildings lated of Date
and and Deprecia- Con- of
Encum- Improve- Improve- Carrying Improve- tion struc- Acqui-
Description brances Land ments ments Costs Land ments Total(2) (3)(4) tion sition
- ----------- ------- ---- ----- ----- ----- ---- ----- -------- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Amounts in thousands)
HOTELS:
Residence Inn-Ontario
Ontario, California.... $9,000 $3,338 $13,555 $1,316 $(775) $3,185 $14,249 $17,434 $5,550 2/86 4/29/88
Residence Inn-Columbus (East)
Columbus, Ohio......... 2,654 587 5,277 1,086 (176) 571 6,203 6,774 2,652 1986 6/17/88
Residence Inn-Fort Wayne
Fort Wayne, Indiana.... 2,782 595 5,541 969 (229) 573 6,303 6,876 2,554 1985 6/17/88
Residence Inn-Indianapolis
Indianapolis, Indiana.. 3,228 996 6,128 1,462 (167) 973 7,446 8,419 3,092 1984 6/17/88
Residence Inn-Lexington 11/85 &
Lexington, Kentucky.... 3,139 799 6,114 1,339 (92) 787 7,373 8,160 2,892 3/86 6/17/88
Residence Inn-Louisville
Louisville, Kentucky... 3,624 1,093 6,880 1,419 (164) 1,070 8,158 9,228 3,476 1984 6/17/88
Residence Inn-Winston-Salem
Winston-Salem,
North Carolina......... 3,183 669 6,341 1,150 (132) 657 7,371 8,028 3,032 1986 6/17/88
Residence Inn-Nashville (Airport)
Nashville, Tennessee... 8,647 - 11,416 2,590 (525) - 13,481 13,481 4,747 1/85 5/26/89
Residence Inn-Altamonte Springs
Altamonte Springs, 1985 &
Florida................ 6,261 1,594 9,862 950 (350) 1,542 10,514 12,056 3,830 1988 3/16/90
------- ------- ------- ------- ------- ------ ------- ------- -------
TOTAL..................... $42,518 $9,671 $71,114 $12,281 $(2,610) $9,358 $81,098 $90,456 $31,825
======= ====== ======= ======= ======= ====== ======= ======= =======
See accompanying notes.
</TABLE>
30
<PAGE>
SCHEDULE III
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.
A California Limited Partnership
REAL ESTATE AND ACCUMULATED DEPRECIATION
NOTES:
(1) The aggregate costs for Federal income tax purposes are $13,985,000 and
$90,733,000 as of December 31, 1997 and December 31, 1996, respectively.
(2) Balance, January, 1, 1995....................................$ 96,213,000
Cost of property and improvements sold....................... (10,491,000)
Capital improvements......................................... 2,163,000
------------
Balance, December 31, 1995................................... 87,885,000
Capital improvements......................................... 2,571,000
------------
Balance, December 31, 1996................................... 90,456,000
Cost of properties and improvements sold..................... (78,797,000)
Capital improvements......................................... 2,250,000
------------
Balance, December 31, 1997..................................$ 13,909,000
============
(3) Balance, January, 1, 1995...................................$ 28,008,000
Accumulated depreciation on property and improvements sold... (2,533,000)
Additions charged to expense................................. 3,460,000
------------
Balance, December 31, 1995................................... 28,935,000
Additions charged to expense................................. 2,890,000
----------
Balance, December 31, 1996................................... 31,825,000
Accumulated depreciation on properties and improvements sold (28,297,000)
Additions charged to expense................................ 1,735,000
------------
Balance, December 31, 1997..................................$ 5,263,000
============
(4) Depreciation is computed on lives ranging from six to 30 years.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The information called for by this item is incorporated herein by reference to
the Registrant's Current Report on Form 8-K filed September 14, 1994 (Commission
File No. 0-17660).
31
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no directors or executive officers. For informational
purposes only, the following are the names and additional information relating
to the directors and executive officers of SSR Realty Advisors, Inc. ("SSR
Realty"), the managing partner of Metric Realty, the managing general partner of
the Partnership.
(a) Directors
Thomas P. Lydon, Jr.
Director, President and Chief Executive Officer, SSR Realty
Mr. Lydon age 49, has been President and Chief Executive Officer of SSR Realty,
or one of its predecessor companies since February 1995. Prior to joining SSR
Realty Advisors, Inc., Mr. Lydon was from April 1992, an Executive Vice
President of MBL Life Assurance Corporation ("MBL") (formerly Mutual Benefit
Life Insurance Company) chosen by the New Jersey Department of Insurance to
oversee and reorganize the real estate investment division of MBL. Mr. Lydon's
experience before joining MBL included serving as Executive Vice President and
Principal of Manhattan Capital Realty Corporation, an investment banking firm,
from 1990 to 1992; as Senior Vice President of Unicorp American Corporation, a
real estate and banking firm, from 1985 to 1990; as Partner and Executive Vice
President of New York Urban Servicing Co., Inc., and as Vice President of Chase
Manhattan Bank, N.A. Mr. Lydon graduated from Syracuse University with a
Bachelor's Degree in Business Administration in 1970.
Ralph F. Verni
Chairman of the Board, SSR Realty
Mr. Verni, age 55, was elected to his position with a predecessor of SSR Realty
in March 1993. He joined State Street Research and Management Company ("State
Street Research"), a subsidiary of Metropolitan Life Insurance Company
("MetLife"), in 1992 as Chairman and Chief Executive Officer and became
President in January 1993. He also serves as Director, President and CEO of SSRM
Holdings, Inc., a wholly-owned subsidiary of MetLife which in turn serves as a
holding company for several of MetLife's investment management subsidiaries. He
is a trustee of 11 registered investment companies in the State Street Research
Fund complex which are managed by State Street Research or an affiliate. Mr.
Verni is a member of the Board of Directors of the CML Group, Inc., a
publicly-traded company. In addition, Mr. Verni is a member of the Advisory
Committee for the MIT Center for Real Estate Development, the Colgate University
Board of Trustees and its Finance Committee, and the Advisory Committee of
Commonwealth Capital Ventures, L.P. Prior to joining State Street Research, Mr.
Verni was President and Chief Executive Officer of New England Investment
Companies, a holding company for the real estate, investment management, and
broker/dealer subsidiaries of New England Mutual Life Insurance Company ("The
New England"), and was also the Chief Investment Officer and a director of The
New England. Prior to joining The New England in 1982, Mr Verni spent 16 years
with The Equitable Life Assurance Company in senior investment management
positions. He holds a Bachelor's Degree from Colgate University and a Master's
Degree in Business Administration from Columbia University.
Gerard P. Maus
Director, SSR Realty
Mr. Maus, age 46, was elected as a director of a predecessor company of SSR
Realty in March 1993. He joined State Street Research as Executive Vice
President, Chief Financial Officer and Chief Administrative Officer in February
1993. Prior to joining State Street, Mr. Maus served since 1983 as a financial
officer of New England and its subsidiary, New England Investment Companies
("NEIC"), most recently as Executive Vice President and Chief Financial Officer
of NEIC from 1990 to January 1993. Prior to holding these positions, Mr. Maus
held financial positions with Bank of New England, Coopers & Lybrand, and
Liberty Mutual Life Insurance Company. He received a Bachelor of Arts Degree in
Business Administration from Rutgers University in 1973 and is a Certified
Public Accountant.
32
<PAGE>
(b) Executive Officers
William A. Finelli
Managing Director and Chief Financial Officer, SSR Realty
Mr. Finelli, age 40, has been Managing Director, and Vice President, Chief
Financial Officer and Treasurer of SSR Realty or one of its predecessor
companies since August 1995. He is responsible for overseeing the day to day
activity of the accounting, finance, technology and valuation areas of the
company. Before he joined SSR Realty, Mr. Finelli served from November 1983 as a
financial executive of MBL. His last position with MBL was Vice President - Real
Estate Accounting. Prior to his years at MBL, Mr. Finelli was with Ernst &
Young, a public accounting firm. Mr. Finelli graduated from Rutgers University
with a Bachelor's Degree in Accounting in 1979 and is a certified public
accountant.
Herman H. Howerton
Managing Director and General Counsel, SSR Realty
Mr. Howerton, age 54, has served as General Counsel with SSR Realty or its
predecessor companies since 1988. From 1984 to 1988, he was employed by Fox
Capital Management Corporation ("FCMC") in various legal positions. He was
employed by Cushman & Wakefield in commercial leasing from 1983 to 1984. Prior
to that, from 1972 to 1982, Mr. Howerton held various positions with Itel
Corporation, including those of Vice President-Administration and Vice
President, General Counsel and Secretary. He received a Bachelor of Arts Degree
from California State University at Fresno in 1965 and a Juris Doctorate Degree
from Harvard Law School in 1968. He is a member of the State Bar of California
and a licensed California real estate broker.
Ronald E. Zuzack
Managing Director, Multi-Housing Operating Company, SSR Realty
Mr. Zuzack, age 54, has been in charge of the Multi-Housing Operating Company of
SSR Realty since its organization in April 1997, and was in charge of Portfolio
Services for certain predecessor companies since March 1988. From 1981 to 1988,
he was employed by FCMC in various portfolio management positions. Prior to 1981
he was employed by Union Bank as Vice President/Manager Real Estate, Sacramento
Region, and acted as Vice President, Development and Property Management while
employed by Inter-Cal Real Estate Corporation. He received his Bachelor of
Science Degree and Master's Degree in Business Administration from the
University of Missouri.
Item 11. Executive Compensation.
The Partnership does not pay or employ any directors or officers. Compensation
to the directors and officers of SSR Realty, the managing partner of Metric
Realty (the managing general partner of the Partnership), is paid by SSR Realty
or its affiliates and is not related to the results of the Partnership.
The Partnership has not established any plans pursuant to which plan or non-plan
compensation has been paid or distributed during the last fiscal year or is
proposed to be paid or distributed in the future, nor has the Partnership issued
or established any options or rights relating to the acquisition of its
securities or any plan relating to such options or rights. However, SSR Realty
is expected to receive certain allocations, distributions and other amounts
pursuant to the Partnership's limited partnership agreement. In addition,
included in the expense reimbursements made to such general partner or
affiliates by the Partnership is an allocation for a portion of the compensation
(including employee benefit plans) paid to personnel rendering asset management
services to the Partnership.
33
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
There is no person known to the Partnership who owns beneficially or of record
more than five percent of the voting securities of the Partnership. Neither the
Partnership's managing general partner nor affiliates of the Partnership's
managing general partner have contributed capital to the Partnership.
The Partnership is a limited partnership and has no officers or directors. The
managing general partner has discretionary control over most of the decisions
made by or for the Partnership in accordance with the terms of the Partnership
Agreement. Each of the directors and officers of the managing partner of the
Partnership's managing general partner, and all of these individuals as a group,
own less than one percent of the Partnership's voting securities.
There are no arrangements known to the Partnership, the operations of which may,
at a subsequent date, result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
None; except that the Partnership in 1997 paid and in 1998 will pay fees and
expense reimbursements to Metric Realty for services provided to the
Partnership. See the Prospectus filed pursuant to Rule 424(b) of the Securities
Act of 1933, which is incorporated by reference herein, and Note 2 to the
Financial Statements in Item 8. All of the individuals listed in Item 10 above
are officers and employees of and receive compensation from SSR Realty or an
affiliate.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1., 2. and 3. See Item 8 of Form 10-K for Financial Statements for the
Partnership, Notes thereto, and Financial Statement Schedules. (A table of
contents to Financial Statements and Financial Statement Schedules is
included in Item 8 and incorporated herein by reference.)
(b) No reports on Form 8-K were required to be filed during the last quarter
of the period covered by this Report other than the letter from the
Registrant to investors dated December 26, 1997 filed on Form 8-K on
December 30, 1997. Subsequent to the close of the quarter, on January 13,
1998 the Registrant filed a report on Form 8-K including the letter from
the Registrant to investors dated January 13, 1998. On January 14, 1998 a
report was filed on Form 8-K reporting the sale of eight of the
Partnership's hotels.
(b) Financial Statement Schedules, if required by Regulation S-K, are included
in Item 8.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
REGISTRANT
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P.,
a California Limited Partnership
By: Metric Realty,
an Illinois general
partnership,
its Managing General Partner
By: SSR Realty Advisors, Inc.,
a Delaware corporation,
its Managing General Partner
By: /s/ Thomas P. Lydon, Jr.
-----------------------------
Thomas P. Lydon, Jr.
President and Chief Executive
Officer, SSR Realty Advisors,
Inc.
Date: March 30, 1998
-----------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
By: /s/ William A. Finelli By: /s/ Ralph F. Verni
-------------------------------------- -------------------------------
William A. Finelli Ralph F. Verni
Managing Director and Chief Financial Chairman of the Board,
Officer, SSR Realty Advisors, Inc. SSR Realty Advisors, Inc.
By: /s/ Gerard P. Maus By: /s/ Thomas P. Lydon, Jr.
---------------------------------- -------------------------------
Gerard P. Maus Thomas P. Lydon
Director, SSR Realty Advisors, Inc. Director, SSR Realty Advisors,
Inc.
Date: March 30, 1998
----------------------------------
35
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 50,153,000
<SECURITIES> 0
<RECEIVABLES> 1,295,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,626,000
<PP&E> 13,909,000
<DEPRECIATION> 5,263,000
<TOTAL-ASSETS> 60,636,000
<CURRENT-LIABILITIES> 3,890,000
<BONDS> 26,983,000
0
0
<COMMON> 0
<OTHER-SE> 29,463,000
<TOTAL-LIABILITY-AND-EQUITY> 60,636,000
<SALES> 0
<TOTAL-REVENUES> 25,778,000
<CGS> 0
<TOTAL-COSTS> 16,334,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,327,000
<INCOME-PRETAX> 2,814,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 7,505,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,319,000
<EPS-PRIMARY> 167.00
<EPS-DILUTED> 0.00
</TABLE>
